“You sold out your entire supply of pearls after 7x-ing your price?” I asked.
“Yeah, we sold out in a week.” CJ told me, matter of factly. I was both surprised and not surprised. SaaS pricing changes are nothing new to me. But the magnitude of the price increase in retail was novel.
CJ continued, “When we bought the pearls, we first sold them for $2 a pearl to try to sell them quickly. For months, no one bought the pearls. We bumped the price up to $15 a pearl and the box sold out that week.”
Price is always a consideration for any buying decision your customers make.
That’s why nailing your pricing strategy is your most impactful element of your growth strategy to get 1,000 customers in a year.
A price increase campaign is the low hanging fruit you should pluck first to get more profit, conversion rates, and customers.
Think about it.
The more revenue you get from the value you deliver, the more you can invest into your product, marketing, and support. Or you can pocket the extra profit.
In simple terms, a price increase done right will make it rain money.
In this article, I’m going to share how we did a price increase for Podpage to increase their annual recurring revenue by 28.5%.
Yes, we increased Podpage’s revenue faster than a Product Hunt launch and TechCrunch feature the month before.
The best part?
Podpage didn’t lose a single customer from the price increase. None of their customers questioned the price update. And early qualitative signals show this improved customer loyalty too.
You too can increase the price of your SaaS... even if you’re an early-stage SaaS like Podpage.
Very founders and the marketers or agencies they hire know how to do a price increase correctly.
It makes sense because there’s a lot potentially at stake.
If you do a price increase campaign wrong, you’ll potentially:
But as I shared earlier about Podpage, it’s quite possible to increase your prices without losing customers and making customers upset. This becomes especially easier if you partner with someone who’s done this before.
Rather than taking action, some founders stall out from considering a price increase campaign because they can’t answer questions like:
Because you’ll be able to command premium rates. This will allow you to invest more into your product, service, and marketing.
Marketing channels are getting more expensive as saturation increases.
A price increase helps you stay in the growth game longer. On the other hand, your competitors who keep their price the same will stagnate and stop growing because they can’t keep up with the saturation.
As such, it’s in your best interest to consider a price increase campaign before your bigger competitors do so.
What should you expect if you execute on a price increase campaign correctly?
A price increase will often:
A price increase will also increase sustainable growth by:
Reducing customer churn. Before the price increase, you should “grandfather” your current customers at the old price to reward their loyalty. This creates “reverse FOMO” because the customer fears quitting means they won’t get the old price again.
Like all forms of marketing, a price increase is a mix of science and art.
A price increase is a science because you can get data to show when you should do a price increase campaign and what to increase your price.
For example, to see if you should consider a price increase, ask yourself:
If you can answer “yes” to one of these questions, you likely should do a price increase campaign.
Pricing is also a science because you can get data on your customer’s willingness to pay for your product. I’ll talk about this more later in this article.
A price increase is also an art because you need to interpret the data.
You need to understand how pricing fits in your brand positioning strategy. A lot of inexperienced founders and marketers get too caught up in pricing psychology without considering the brand strategy. A classic example of this happens when founders ask if they should end prices using “magical numbers” like 7, 9, or 0.
Sure, conversion tends to be 15 to 20% higher for lower priced SaaS products ending in 9. But net-retention is usually 10% higher for products ending in 0. What’s more important is to consider that prices ending in 9 appear as a discount and how that plays into your brand strategy.
You need to understand how pricing fits in your go-to-market strategy. Do you have product-market fit? How many pricing plans do you have? Do you have a freemium or a free trial plan? Are you using a self-serve sales model or do you require a demo?
All these questions change the art of how to price your product.
While the art of pricing is important, let’s start by adding some science into your pricing strategy.
When you start the 8-step process to increase your prices, don’t forget to...
“What gets measured gets managed.” ~ Peter Drucker.
Before starting any marketing campaign, you need clear metrics and how you will measure success. You’ll want to decide this before you start to keep everyone honest. Otherwise it’s all too easy to bend the numbers to make the campaign look good.
For Podpage, we wanted to estimate the immediate revenue increase as they got new customers and current customers upgraded plans. So we chose to look at their recurring revenue and new customer subscriptions.
Podpage is an early-stage startup so the best comparison was to the previous month’s data.
This proved to be an exciting challenge because Podpage launched on Product Hunt and was featured in TechCrunch the month before the price increase.
Once you have your success metrics, it’s time to get your hands dirty and get some customer data.
At Growth Ramp, we take a customer-first approach to product-led growth. This means before coming up with growth ideas for the go-to-market strategy, we first want to talk to customers.
AKA, “getting outside the building.” Or at least sending customer surveys and hopping on phone calls in a post-COVID world.
After all, it’s the customer who has the problem, right?
This is one way to doing things that don’t scale that will enable you to scale your growth faster.
There are many opportunities to get customer data.
You can use behavior analytics tools with on-site surveys and feedback widgets. This can work if you have several thousand people going to your website every month.
But because response rates are low (and therefore slower), I recommend setting up an email outreach sequence to all customers.
Unless you know how to send outreach emails, you may want to start by asking 5-10 survey questions. This way you’ll have a higher survey completion rate.
Here are the seven pricing questions we used for Podpage’s price increase campaign:
Once you’ve sent the surveys out, you’ll want to segment the customer data to optimize for growth.
Was it strange that I recommended you should ask your customers to describe themselves, even though you’re doing a price increase campaign? What about asking about how they feel about your product?
These two questions may seem out of place.
But smart founders know word-of-mouth is the holy grail of marketing. As such the best growth strategies optimize for the customers who love your product and spread the word to others.
There are three types of segmentation I recommend you do to get maximum results for your price increase campaign:
Now you’ll want to find out the willingness to pay for each customer segment.
The next step is to look at the four willingness to pay pricing questions:
To use this data you will first want to set up a price sensitivity table in Google Sheets. Your price sensitivity table should look something like this:
Using this data you can create a line graph based on your customer’s price range. Your graph should look something like this:
Once you create your line chart, you are looking for the acceptable price range. AKA, your money zone:
Remember to segment your customers and run an analysis for each segment.
Now you’ll want to chose the price to align with your growth strategy.
Pricing your product above or below the money zone will drastically decrease your revenue. But there are still several prices to choose from.
There are four key points in this graph you want to look at:
Here are three questions to consider what to price your product:
Either way, pricing your product in your money zone is a fantastic starting point.
Once you’ve chosen your pricing, it’s time to create a plan to let your customers know about the pricing change.
You have decided on your new price. But before you increase your prices, you should create a simple plan to notify your customers. This will allow you to increase your expansion revenue and new customer revenue.
For Podpage, we did a two week notification campaign, but you can test different lengths.
Let’s look at where you should share a price increase and how to let customers know about the price increase.
There are many marketing channels you can use to promote your price increase.
My recommendation is to use the channels already in your go-to-market strategy. This way you don’t need to learn a new GTM strategy. Furthermore your customers are expecting communication on those channels.
You may find it especially valuable to notify customers by email and on your pricing page. Email often has the highest engagement rate. And your customers are expecting price information on the pricing page.
What’s important is to consider if you’re targeting new customers or existing customers. Once you have done so, you’ll want to decide what’s the main call to action.
The simple answer is you just tell them it’s happening and when. If you did your research right, very few customers, if any, will respond negatively to your new prices.
That said, here are some goals to keep in mind when telling your customers:
Now it’s time to raise the roof and raise your prices.
Once you’ve reached your deadline, it’s time to raise your prices.
Keep in mind that your customers will ask you questions and favors for the next week or so. For example their credit card expired, can they get in at the old price? It’s up to you how you want to handle these cases.
Before you make any exceptions you’ll want to think how your decision changes someone’s trust in your company.
Let’s say you told people the 1st of the month is when prices go up. On the 3rd a customer asks for the old price.
Whatever you decide is best, I recommend waiting two weeks before measuring the impact of your campaign. This gives time for the dust to settle into what’s your new normal.
After the price increase campaign finishes, it’s time to go back to see how well the campaign performed.
In particular, you want to answer these questions:
In the unlikely event a price increase did not work, you can always do a campaign to revert back to the old prices.
To do this, you’ll want to inform customers about your decision to lower your price. You’ll also want to offer them a chance to downgrade and refund the difference if the only reason they upgraded was because of the new price.
A price increase is simple, powerful, but not easy.
If you do a price increase wrong, you can harm your business. You can lose customers, increase customer complaints, and decrease customer loyalty.
But in the hands of a professional product marketer, a price increase can work wonders. It can get new customers, increase your revenue, and beat your competitors. For Podpage, compared to the month before their annual recurring revenue increased by 28.5%.
If you feel confident in your ability to do a price increase campaign, just follow our playbook.